Why Shopify's Q3 Is So Surprising

Shopify Inc. (NYSE: SHOP) released its third-quarter financial results before the markets opened on Thursday. The firm said that it had a surprising net loss of $0.29 per share and $390.6 million in revenue, compared with consensus estimates of $0.11 in earnings per share (EPS) and $383.76 million in revenue. In the same period of last year, it said it had EPS of $0.04 on $270.06 million in revenue.

Subscription Solutions revenue grew 37% to $165.6 million in the latest period. This increase was driven primarily by growth in monthly recurring revenue, largely due to an increase in the number of merchants joining the Shopify platform.

Merchant Solutions revenue grew 50%, to $225.0 million, driven primarily by the growth of gross merchandise volume.

At the end of the quarter, monthly recurring revenue increased 34% year over year to $50.7 million and growth of gross merchandise volume increased 48% to $14.8 billion.

Looking ahead to the fourth quarter, the company expects to see revenue between $472 million and $482 million and adjusted operating income in the range of $10 million to $20 million. Consensus estimates call for $0.27 in EPS and $470.58 million in revenue for the quarter.

Amy Shapero, Shopify’s chief financial officer, commented:

Our strong results in the quarter were driven in part by the success of our international expansion, which is just one of the many ways we are investing in the platform. By carefully balancing these multiple opportunities that have different investment time horizons, we can keep investing in the innovations that will power merchants in the future while helping them grow rapidly today.

Shares of Shopify traded down 5% or so early Tuesday at $308.06, in a 52-week range of $117.64 to $409.61. The consensus price target is $362.04.